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Visitor II

Capital Gains Tax on Real Estate Sale

I'm trying to understand how I calculate the capital gains tax on the sale of my home. I sold my home this year and I qualify for the $250,000 exemption. (I lived in the house for 3 out of the last 5 years). If I initially bought the house for $200k and now sold it for $650k, what amount do I report for capital gains? Is it roughly $650k-$200k-$250k=$200k? And would the capital gains tax be 15% of those $200K = $30k? Thank you very much.

2 Comments
Catalyst V

Capital Gains Tax on Real Estate Sale

Sorry but you can't take the section121 exemption(that 250k for a single owner) as a part of your cost basis. If you are eligible for the exclusion Turbotax will show that. If you used  your home as a rental or had a home office that complicates things. Answer all the questions in order when you start.

You can include any selling/closing costs and the cost of improvements you made-say a new fence.

https://turbotax.intuit.com/tax-tips/home-ownership/tax-aspects-of-home-ownership-selling-a-home/L6t...

 Some of your capital gains will be at a lower rate-the highest depends on your total income for the year. Let the software do the calculations for you.

Catalyst V

Capital Gains Tax on Real Estate Sale

Basically, your gain is the amount over your cost basis. Your cost basis is determined by what you paid for the property, plus what you paid for any property improvements while you owned it. If depreciation was taken on the property or any part of the property used for a business of any type while you owned it, then that depreciation has to be recaptured in the year you sell it, and you will pay taxes on that recaptured depreciation.

Now understand that if you have depreciation on the property, then no matter what you will pay tax on that recaptured depreciation. It's not included in the "lived in 2 of last 5 years" capital gains exclusion rules.

Then, you get to deduct $250K of the gain from taxation if you meet the requirements. If married and your spouse also lived in the house for 2 of the last 5 years, and you two are filing a joint return, then double the exclusion to $500K.

The program will deal with this just fine. If the property was your primary residence in the year you sold it, then you'll report the sale under the Personal Income tab in the "Sale of Home (Gain or Loss)" section. Otherwise, if it was rental property at the time you sold it, then you'll report the sale in the Rental & Royalty Income (SCH E) section of the program. Both sections handle the capital gains exclusion just fine.